Subchapter J. Examination Expenses and Assessments

28 TAC §7.1012

1.
INTRODUCTION. The Commissioner of Insurance adopts amendments to §7.1012, concerning assessments to cover the expenses of examining domestic and foreign insurance companies. The amended section is adopted without changes to the proposed text published in the November 25, 2005, issue of the
TexasRegister (30 TexReg 7806).

2.
REASONED JUSTIFICATION. The amendments are necessary to adjust the rates of assessment to be levied against and collected from each domestic and foreign insurance company examined during the 2006 calendar year.

3.
HOW THE SECTION WILL FUNCTION. Section 7.1012 provides the method and rates of assessment for examination expenses of foreign and domestic insurance companies. Rates of assessment are levied against and collected from each domestic insurance company based on admitted assets and gross premium receipts for the 2005 calendar year, and from each foreign insurance company examined during the calendar year 2006 based on a percentage of the gross salary paid to an examiner for each month or part of a month during which the examination is made. The department anticipates that the adopted rate will produce revenue of $9,945,440 to the state's general revenue fund. The assessments made under authority of the adopted section are in addition to, and not in lieu of, any other charge which may be made under the law, including Insurance Code Article 1.16.

4.
SUMMARY OF COMMENTS. The department did not receive any comments on the proposal.

5.
STATUTORY AUTHORITY. The amendments are adopted under the Insurance Code Article 1.16 and §36.001. Article 1.16(a) and (b) authorize the Commissioner of Insurance to make assessments necessary to cover the expenses of all examinations of domestic insurance companies by the department or under its authority and to cover all the expenses and disbursements necessary to comply with the provisions of the Insurance Code Articles 1.16, 1.17, and 1.18, in such amounts as the Commissioner certifies to be just and reasonable. Article 1.16(f) provides that expenses incurred in the examination of foreign insurers by department examiners and other department personnel shall be collected by the Commissioner by assessment. Section 36.001 provides that the Commissioner may adopt any rules necessary and appropriate to implement the powers and duties of the department under the Insurance Code and other laws of this state.

(a) Foreign insurance companies examined during the 2006 calendar year shall pay for examination expenses according to the overhead rate of assessment specified in this subsection in addition to all other payments required by law including, but not limited to, the Insurance Code Article 1.16. Each foreign insurance company examined shall pay 34% of the gross salary paid to each examiner for each month or partial month of the examination in order to cover the examiner's longevity pay; state contributions to retirement, social security, and the state paid portion of insurance premiums; and vacation and sick leave accruals. The overhead assessment will be levied with each month's billing.

(b) Domestic insurance companies shall pay according to this subsection and rates of assessment herein for examination expenses as provided in the Insurance Code Article 1.16.

(1) The actual salaries and expenses of the examiners allocable to such examination shall be paid. The annual salary of each examiner is to be divided by the total number of working days in a year, and the company is to be assessed the part of the annual salary attributable to each working day the examiner examines the company during 2006. The expenses assessed shall be those actually incurred by the examiner to the extent permitted by law.

(2) An overhead assessment to cover administrative departmental expenses attributable to examination of companies, which shall be paid and computed as follows:

(A) .00299 of 1.0% of the admitted assets of the company as of December 31, 2005, upon the corporations or associations to be examined taking into consideration the annual admitted assets that are not attributable to 90% of pension plan contracts as defined in Section 818(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 818(a)); and

(B) .00954 of 1.0% of the gross premium receipts of the company for the year 2005, upon the corporations or associations to be examined taking into consideration the annual premium receipts that are not attributable to 90% of pension plan contracts as defined in Section 818(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 818(a)).

(3) If the overhead assessment, as computed under paragraph (2)(A) and (B) of this subsection, produces an overhead assessment of less than a $25 total, a minimum overhead assessment of $25 shall be levied and collected.

(4) The overhead assessments are based on the assets and premium receipts reported in the annual statements, except where there has been an understating of assets and/or premium receipts.

(5) For the purpose of applying paragraph (2)(B) of this subsection, the term "gross premium receipts" does not include insurance premiums for insurance contracted for by a state or federal government entity to provide welfare benefits to designated welfare recipients or contracted for in accordance with or in furtherance of the Texas Human Resources Code, Title 2, or the federal Social Security Act (42 U.S.C. §301 et seq.)

(c) The overhead assessment assessed under subsections (b)(2) and (b)(3) of this section shall be payable and due to the Texas Department of Insurance, P.O. Box 149104, MC 108-3A, Austin, Texas 78714-9104 within 30 days of the invoice date.